DESTINATION XL GROUP, INC.

Destination XL Group, Inc., together with its subsidiaries (the “Company”), is the leading specialty retailer of big + tall men’s apparel with retail locations throughout the United States. We operate under the trade names of Destination XL®, DXL®, DXL® Big + Tall, DXL Men’s Apparel, DXL outlets, Casual Male XL®and Casual Male XL outlets. At February 1, 2025, we operated 247 DXL retail stores, 15 DXL outlet stores, 7 Casual Male XL retail stores, 19 Casual Male XL outlet stores, and a digital business, including an e-commerce site atwww.dxl.com, a mobile sitem.destinationXL.com and mobile app. Unless the context indicates otherwise, all references to “we,” “our,” “ours,” “us” and “the Company” refer to Destination XL Group, Inc. and our consolidated subsidiaries. We refer to our fiscal years ended February 1, 2025, February 3, 2024 and January 28, 2023 as “fiscal 2024,” “fiscal 2023” and “fiscal 2022,” respectively.

OUR INDUSTRY

We define the big + tall men’s clothing market as starting at a waist size for pants of 38” and greater, as well as tops sized 1XL and greater. With our proprietary fit and extensive selection of exclusive brands, we believe that we can grow market share as an integrated commerce retailer able to target a broad market, attracting customers from various income, age and lifestyle segments, offering the underserved consumer the widest selection of sizes and styles.

OUR HISTORY

Our Company was incorporated in the State of Delaware in 1976 under the name "Kara Enterprises, Inc." and subsequently operated under the name "Designs, Inc." Until fiscal 1995, we operated exclusively in Levi Strauss & Co. branded apparel mall and outlet stores. In May 2002, we acquired the Casual Male business from Casual Male Corp. at a bankruptcy court-ordered auction. At the time of the acquisition, Casual Male was the largest specialty retailer of men’s clothing in the big + tall market in the United States. As a result of the acquisition, on August 8, 2002, we changed our name to “Casual Male Retail Group, Inc.”

In fiscal 2010, we launched a new store concept, Destination XL (“DXL”). The DXL store concept offers our customers an extensive assortment of products, ranging from value-oriented to luxury-oriented with an increased presence of name brands, without having to shop multiple stores. In addition to offering our customers a wide assortment, we also wanted to provide them with a unique shopping experience. We are focused on providing outstanding customer service through our DXL stores, with larger fitting rooms and professional, trained associates providing personal attention. With the initial success of this store format, we made a similar change to our e-commerce business in fiscal 2011 when we launched our DestinationXL.com website (now dxl.com).

OUR BUSINESS

We operate as an integrated commerce retailer of big + tall men’s clothing and footwear. Through our multiple brands, which include both national brands and our own brands, we provide a premium, personalized shopping experience, whether in-store or digitally, with a broad range of merchandise at varying price points, catering from the value-oriented customer to the luxury customer. Our objective is to appeal to all of our customers by providing a good, better, best array of product assortments in all primary lifestyles with multiple and convenient ways to shop.

What is unique about our business is our proprietary fit, our ability to manage an array of sizes and optimize our in-stock position throughout each season. Our best-selling pant has 58 size combinations and a unique fit specification as compared to an average retailer who may have as few as 15 to 20 different size combinations. We maintain a consolidated inventory assortment across all channels that enables us to manage our in-stock position of all sizes effectively, ultimately improving customer service. Moreover, our planning and allocation methodologies help to optimize each location’s market potential without carrying excessive inventory levels.

Our DXL retail stores, e-commerce site, dxl.com, and mobile app cater to all income demographics and offer our customers merchandise to fit a variety of lifestyles from casual to business, young to mature, in all price ranges and in all large sizes from XL and up. In addition, we offer a selection of footwear in sizes 10W to 17W on our website at dxl.com. Our Casual Male XL retail stores primarily carry moderate-priced national brands and our own brands of casual sportswear and dresswear. We also operate Casual Male XL outlets and DXL outlets for our value-oriented customers. Through digital marketplaces, we are able to extend our reach by providing a select offering of our merchandise to new customers who may not be current DXL customers.

BUSINESS STRATEGY

Over the past several years, we have transformed our business, investing in our customer relationship capabilities, our data infrastructure and our data analytics capabilities. We have achieved a heightened level of operational excellence, recapitalized our balance sheet to provide a greater level of financial flexibility, made investments in our technical capabilities, and upgraded our leadership team.

Progress on Our Long-Range Plan and Future Growth Strategy

During fiscal 2024, we made meaningful progress with many aspects of our long-term strategic growth initiatives, and we continue to believe that these initiatives will give us the opportunity to build greater brand awareness and a greater opportunity for long-term growth over time. However, we believe the men's apparel market has faced significant macroeconomic and sector headwinds that have contributed to weak consumer demand for Big + Tall apparel. With the continued downward cyclical pressure on sales, we have paused certain objectives to focus on protecting our existing business and mitigating erosion in free cash flow. While we still remain committed to our long-range plan, we believe adjusting the timeline for aspects of our initiatives is prudent to ensure that we remain fiscally responsible with our investment spending and focused on near-term profitability and generating free cash flow. As we head into fiscal 2025, we will remain focused on executing this strategic plan, but in light of weak consumer demand, we are prioritizing operational efficiency as we aim to enhance profitability:

Marketing and Brand Building. We launched our new brand advertising campaign in the second quarter of fiscal 2024 to build awareness of our brand. The campaign ran in a three-matched-market test in Boston, Detroit, and St. Louis and the results were positive in all three markets, with increases in traffic, transactions, and new customer acquisition. However, given the soft sales trends in fiscal 2024 and our year-over-year decline in profitability, we did not believe it was prudent to continue to invest in our brand awareness initiative in the second half of fiscal 2024. While the initial test provided important insight and was directionally positive, the results were not accretive enough to pursue in the current environment. Instead, we invested in several direct, working marketing initiatives to appeal to our customer who may be feeling the financial stress and pulling back on discretionary spending. Our marketing spend plan for fiscal 2025, which we expect to be approximately 6% of sales, does not include any brand awareness advertising.

Store Development. While we have stores in every major metropolitan market across the United States, there are geographic voids in certain markets where big + tall consumers are not being served by a DXL store. Our consumer research has indicated that 44% of big + tall men self-reported that they do not shop with us because a store is not located near them, while 35% self-reported that they do not shop with us because a store location is not convenient. During fiscal 2024, we opened seven new stores, with eight additional stores scheduled to open in fiscal 2025. Store expansion will continue to be a key component of our long-term growth strategy, but until the men's retail apparel business improves and DXL consumer demand recovers, we plan to pause the opening of new stores in fiscal 2026. All new store and conversion investments are subject to rigorous ROIC hurdles that are informed by our prior experience.

New Website Platform. During fiscal 2024, we started the transition to a new and improved e-commerce platform, with 100% of the site traffic now diverted to our new platform. This project will be completed by April 2025. The platform addresses friction online and will drive a richer and simpler consumer experience, with measurably greater speed and agility. Our customers will also see significant improvement with product detail pages, the checkout process and search experience. This new platform will enable us to respond faster and more effectively to make changes in the future.

Alliances/Collaborations. We strongly believe that our "fit authority" is one of our greatest assets and that we can develop successful collaborations with other brands that are interested in finding a cost-effective way to expand their offering to include big + tall men's apparel. In the second quarter of fiscal 2024, we launched our DXL Big + Tall merchandise assortment on Nordstrom's digital marketplace platform. We believe this collaboration will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer, thereby further extending our relationship with the female consumer. During the first quarter of fiscal 2025, we will be launching TravisMathew, Fit by DXL online and in select stores. In addition to these collaborations, we are continually looking to expand upon our exclusivity with national brands. We believe our heritage of providing a world-class consumer shopping experience makes DXL ideal for collaborations and alliances.

New Initiatives for Fiscal 2025

Our plans for fiscal 2025 include several initiatives aimed to enhance our market position by specifically appealing to our value-driven customers who are more price sensitive and less inclined to shop during this downward economic cycle.

DXL Rewards Program. At the start of fiscal 2025, we introduced our new DXL Rewards program, with compelling benefits to deepen engagement across our customer base. The new program provides our customers with a simplified program that rewards our best customers with benefits and perks that matter to them. It further allows us greater flexibility in using the program as a fundamental driver of value, reducing pressure on broad-based promotion.

Improving our Value Proposition. In late fiscal 2024, we announced a price-match guarantee program, and in early fiscal 2025, we introduced our Fit Exchange by DXL program, which provides our customers the ability to come to our store and donate clothes that no longer fit in exchange for a promotional discount. We have also introduced a discount for active-duty military, veterans, first responders and teachers. One of our key priorities for fiscal 2025 will be to leverage strategic promotions to stay competitive and deliver a better value proposition. Lastly, we are also expanding our opening price point in our merchandise assortment by adding several new brands and expanding the assortment of some of our well-established brands.

FiTMAPSM. Over the past two years, we have been working with and testing a proprietary FiTMAP Sizing Technology for which we have an exclusive license for Big + Tall men until 2030. This innovative, contactless, digital scanning technology captures 242 unique measurements and offers custom clothing options for all our customers, and size recommendations across the variety of brands for a great fit. FiTMAP offers a unique experience for our customers, whether selecting from our Ready-to-Wear (RTW) clothing or opting for custom garments. This technology currently provides recommended sizes in all of our private label brands, as well as 15 of our exclusive national brands. We believe this technology will enhance customer engagement, attract new customers and establish DXL as a technology leader in men's big + tall apparel. FiTMAP is currently in 25 DXL retail locations with plans to add another 25 stores in early fiscal 2025. We are in the preliminary stage of deploying a mobile app for this technology which will enable our customers to scan themselves at home. We expect that this will drive sales in our direct business.

As we head into fiscal 2025, we will continue to look for new opportunities to support our customer during this downward economic cycle and endeavor to enhance and build brand affinity.

MERCHANDISE

We offer our customers an extensive assortment of apparel consisting of both our own brands and over 100 well-known national brands, within our “good,” “better” and “best” price points. Regardless of our customers’ age, socioeconomic status, or lifestyle preference, we are able to assemble a wardrobe to fit their apparel needs. With over 5,000 styles available, we carry an extensive selection of tops in sizes up to 8XL and 8XLT, bottoms with waist sizes 38” to 66”, and footwear in sizes 10W to 17W.

Our proprietary fit sets us apart from our competitors. Our merchandise is not just an extension of regular sizes. The fit is constructed from unique specifications for every size and style, with specific design features for the big + tall customer.

Our stores are merchandised to showcase entire outfits by lifestyle, including traditional, active, modern, tailored and denim. This format allows us to merchandise key items and seasonal goods in prominent displays and makes coordinating outfits easier for the customer while encouraging multi-item purchases. This lifestyle layout also allows us to manage store space and product assortment effectively in each market to target local demographics.

Merchandise assortments in our DXL stores are organized not only by lifestyle, but within each lifestyle, the assortments are shown in a “good,” “better” and “best” visual presentation. With the “best” merchandise assortments featured most prominently in the DXL store, our customers can visualize current fashion trends and select their wardrobes within their desired price points in a convenient manner.

Big + tall is all we do, and through our own brands and exclusivity with national brands, we estimate that more than 80% of our inventory assortment, in units, is not available elsewhere. Several of the national brands that we carry in sizes 2XL and above are sold exclusively by us in our stores and on our website and may otherwise only be available on the brand’s website, if at all. In addition to our exclusive brands, we also work with several other national brands to offer a unique, curated merchandise assortment in sizes 2XL and above that are sold exclusively in our stores and on our website and are not available on the brand’s own website. These offerings are a subset of the larger merchandise offering that we carry for these respective brands. The penetration of national brands in a specific DXL store can range from 39% to 80%, depending on several factors, but on average, approximately half of the assortment is branded apparel.

During the first quarter of fiscal 2025, we will be launching the brand TravisMathew, Fit by DXL online and in select stores. TravisMathew is a premium men’s lifestyle apparel brand that blends performance, casual, and golf-inspired styles. We continue to explore strategic collaborations with other brands that are widely recognized and that could complement our curated assortment.

Value-Priced Apparel - “Good” Merchandise

For our value-oriented customers, we carry Champion, Lee, Wrangler and Reebok. In addition, we carry the following value-priced private label lines:

Harbor Bay® was our first proprietary brand and it is a traditional line that continues to represent a significant portion of our business, specifically in terms of our core basic merchandise.

Oak Hill® is a premium line catering to those customers looking for slightly more style and quality than our Harbor Bay line, but still in a traditional lifestyle.

Synrgy™targets the customer looking for a contemporary/modern look.

True Nation® is a denim-inspired line consisting of vintage-screen t-shirts and wovens and is geared towards our younger customers.

Society of One® is an activewear brand that offers versatile styling options and is grounded by performance technology.

Moderate-Priced Apparel - “Better” Merchandise

We offer our customers an extensive selection of quality sportswear and dress clothing at moderate prices carrying well-known brands, such as Levi's®, Columbia, Carhartt®, and Jockey®. Our exclusive brands in this price range include O’Neill®, Nautica®, Adidas Golf® and vineyard vines®. Within our product assortment for Callaway®, Majestic and Tommy Bahama®, we also offer exclusive styles specially curated for our customers.

Higher-End Fashion Apparel - “Best” Merchandise

Within this higher-end price range, we carry a broad selection of quality apparel from well-known branded manufacturers, such as The North Face®, Polo Ralph Lauren®, Jack Victor®, Boss®, Faherty®, Original Penguin Golf®, Michael Kors®, and Tallia®. Our exclusive brands in this price range include Brooks Brothers®, JOE’S®Jeans, 7 for all Mankind®, Boss®, Faherty®, Original Penguin Golf® and Robert Barakett®. Within our product assortment for Psycho Bunny®, Lucky and Robert Graham®, we also offer exclusive styles specially curated for our customers. Polo Ralph Lauren builds one collection each quarter for our customers that is exclusive to DXL.

Footwear

Our DXL website offers an assortment of footwear, with a broad selection from casual to formal, in varying price points. We currently have a selection of more than 200 styles of footwear, ranging in sizes from 10W to 17W, including designer brands such as Cole Haan®, Timberland®, Sketchers®, New Balance®, Reebok® and Deerstags.

STORE CHANNEL

DXL Men’s Apparel Stores

As of February 1, 2025, we operated 247 DXL retail stores that cater to our diverse customer base, with merchandise representing all price points, from our higher-end brands to value-oriented brands, and all lifestyles, from business to denim. The size of our DXL stores averages 7,300 square feet. Depending on the customers in each respective market, we can adjust the appropriate mix of merchandise, with varying selections from each of our price points, to cater to each demographic market. Our DXL stores are located on real estate that is highly visible, often adjacent to high-performing regional malls or other high-traffic shopping areas.

During fiscal 2024, we opened seven new DXL stores, re-located two DXL stores, converted eight Casual Male XL stores to the DXL format and completed five DXL store remodels. These new DXL stores offer an updated look and feel both inside and outside, with the store layout focusing on improving our customer engagement and their overall shopping experience. We have plans to open eight new stores in fiscal 2025 after which we intend to pause our new store development program in fiscal 2026 as we prioritize our focus on profitability and free cash flow generation given the current headwinds we are facing. We believe that our store portfolio is a vital asset to our business strategy and we believe there is still opportunity to open additional DXL stores across the country once the current downward economic cycle recovers.

Casual Male XL Retail Stores

As of February 1, 2025, we operated 7 Casual Male XL full-price retail stores, which are located primarily in strip centers or stand-alone locations. The majority of the merchandise carried in our Casual Male XL stores consists of moderate-priced basic or fashion-neutral items, such as jeans, casual pants, t-shirts, polo shirts, dress shirts and suit separates. These stores also carry a full complement of our own brand collections. The average Casual Male XL retail store is approximately 3,100 square feet.

DXL Outlet /Casual Male XL Outlet Stores

As of February 1, 2025, we operated 15 DXL outlet stores and 19 Casual Male XL outlet stores designed to offer a wide range of casual clothing for the big + tall customer at prices that are generally 20-25% lower than our moderate-priced merchandise. Much of the merchandise in our outlet stores is offered at discounted prices to cater to the value-oriented customer. In addition to our own brands and national brands at our “good” price tier, our outlets also carry clearance product obtained from DXL and Casual Male XL stores, offering the outlet customer the ability to purchase brand and fashion product for a reduced price.

The average DXL outlet is approximately 5,100 square feet and the average Casual Male XL outlet store is approximately 3,000 square feet.

DIRECT CHANNEL

Our direct business is a critical channel for growing sales and market share through new customer acquisition and digital engagement of the active file. Since fiscal 2019, comparable sales from our direct business in fiscal 2024 have grown 33%, with our total direct business representing 30.3% of our total retail sales in fiscal 2024, as compared to 23.1% of our total retail sales in fiscal 2019.

We define our direct business as sales that originate online, whether through our website, our app, online at the store level, our Guest Engagement Center, or a third-party marketplace. We want to serve our customers wherever and however they want to shop, whether in-person at a store, over the telephone, or online via a computer, smartphone or tablet.

A key to being a successful integrated commerce retailer is having the ability to showcase all of our store inventories online, resulting in additional transactions that are initiated online, but are ultimately completed in store. In addition, our stores are able to fulfill an order for an item that is out-of-stock in our warehouse. This capability has not only resulted in incremental sales, but it has also helped us reduce clearance merchandise at the store level and manage margins.

DXL Website and App

Our DXL website and app have been instrumental in our growth as we continue to see our consumers shift to online shopping helping to drive higher new customer acquisition for the website business.

During fiscal 2024, we upgraded our website from our legacy infrastructure to a new, modern e-commerce platform, with various features and functionality, with final migration efforts scheduled to be completed by April 2025. This upgrade provided immediate performance improvements and we believe that the customer experience has improved by eliminating friction points, optimizing search capability, and enhancing speed and response times. The new platform is engineered by a leading e-commerce technology provider and will position us to respond faster and more effectively to make changes in the future.

Digital Sales at Store Level

In support of our integrated commerce approach, our store associates use our website to help fulfill our in-store customers’ clothing needs. If a wider selection of a lifestyle, color or size of an item is not available in our store, then our store associates can order the item for our customer online through our direct channel and have it shipped to the store or directly to the customer. Our customers also have the ability to shop online by store and pick-up the item in store on the same day.

Digital Marketplaces

We continue to extend our reach through digital, third-party marketplaces. A portion of our assortment remains available on Amazon.com and Walmart.com. Digital marketplaces provide us an opportunity to drive awareness, grow our customer base and introduce new customers to our brand.

In the second quarter of fiscal 2024, we launched our DXL Big + Tall merchandise assortment on Nordstrom's digital marketplace platform and are pleased with the initial success. We currently have 37 brands and over 2,200 styles available on the platform. To date, customers have primarily discovered our product offering through site search, but in fiscal 2025, we will be executing a marketing plan, in collaboration with Nordstrom, which will include email, seller pages, personalized DXL/Brand content, Men’s department landing page, programmatic marketing, and, while our product is offered only on the Marketplace, in-store training and education for sales staff and personal stylists. We believe this collaboration will allow us to bring the DXL experience beyond our four walls and directly to the Nordstrom customer, thereby further extending our relationship with the female consumer.

MERCHANDISE PLANNING AND ALLOCATION

Our merchandise planning and allocation function is critical to the effective management of our inventory, store assortments, product sizes and overall gross margin profitability. The merchandise planning and allocation team has an array of planning and replenishment tools available to assist in maintaining an appropriate level of inventory, in-stock positions at each store and the direct channel, and pre-season planning for product assortments for each store and the direct channel. Additionally, in-season reporting identifies opportunities and challenges in inventory performance. Over the past several years, we have made, and we will continue to make, investments in implementing best practice tools and processes for our merchandise planning and allocation.

Our evergreen merchandise made up approximately 43% of our merchandise assortment in fiscal 2024. Our planning and allocation team estimates quantity and demand several months in advance to optimize gross margin and minimize end-of-season merchandise for all seasonal merchandise. We develop customized assortment strategies by store that accentuate lifestyle preferences for each particular store.

Our merchandising data warehouse provides the merchandising team with standardized reporting for monitoring assortment performance by product category and by store, identifying in-stock positions by size and generally monitoring overall inventory levels relative to selling. At season end, we analyze the overall performance of product categories, overall assortments and specific styles by store to focus on the opportunities and challenges for the next season’s planning cycle.

The merchandise planning and allocation team utilizes a set of specific universal reporting tools in fulfilling their daily, weekly and monthly roles and responsibilities. These reporting tools provide focused and actionable views of the business to optimize the overall assortment by category and by store. We are confident that our inventory performance is optimized by having all members of the merchandise planning and allocation team follow a standardized set of processes with the use of standardized reporting tools.

STORE OPERATIONS

We believe that our store associates are critical to creating the highest quality experience for our guests. The culture in our stores is to be guest-centric—to engage and build a relationship with each of our customers. Our overall goal is to accomplish three key initiatives in our stores. The first is that we strive to build relationships with all of our guests. The second is that we believe our stores need to be clean, neat and organized in an effort to allow the “just-looking” customer to find what he needs with ease. The third is that our stores serve as mini-distribution centers. The majority of our stores are able to fulfill customer orders that were placed online in one of our digital channels. Our associates are well versed in not only the product selection carried in their specific store, but also the product selection carried online. With a point-of-sale system that can access items online for the guest who is physically in the store, our associates are able to fulfill all of their customers’ needs.

Our multi-unit field management team receives extensive training on recruiting associates who are the correct fit for our stores. All store associates participate in our DXL FIT Expert Training and Certification program as part of our commitment to deliver a great guest experience. All new DXL store management team hires are trained extensively through senior peer trainers throughout the country. We believe having a mix of internal promotions (store manager to Regional Sales Manager) as well as external hires with extensive multi-unit background gives us a Regional Sales management team that reflects our customer base. Regional Vice Presidents give us touchpoints in the field in addition to our Regional Sales Managers and store management team to ensure consistency in executing our standards and all programs and processes we deem important to our success.

Each new member of the store management team goes through extensive training with their Regional Sales Manager and a peer Store Manager. We believe our training system, together with monitoring sales metrics to help identify opportunities for further training, will improve sales productivity and strengthen our customers’ brand loyalty.

Our field organization is overseen by our Chief Stores and Real Estate Officer, VP Store Operations, Regional Vice Presidents, Regional Sales Managers, and a Store Operations Team, who provide management development and guidance to individual store managers. Each Regional Sales Manager is responsible for hiring and developing store managers at the stores assigned to that Regional Sales Manager’s market, and for the overall operations and profitability of those stores. Each store is staffed with a store manager, assistant manager and key holders. The store manager is responsible for achieving certain sales and operational targets. Our stores have an incentive-based commission plan for managers and selling staff to encourage associates to focus on our customer’s wardrobing needs and sales productivity.

MARKETING AND ADVERTISING

We believe that our marketing initiatives are critical to driving our sales growth by increasing traffic to our stores, website and app. Our brand initiatives invite our customer to experience not only the depth of our assortment, but also the breadth of exclusivity across our brands by offering brands and styles that are not available elsewhere. We are providing him with the freedom to choose his own style and wear what he wants. Big + Tall is all we do, and we trade on the belief that we offer superior fit, assortment, and experience to him and through these initiatives we are eager to develop relationships with our customers that are built on respect, trust, and belonging.

Building brand awareness remains our greatest opportunity for the long term. However, until consumer spending in the men’s apparel sector begins to improve, our marketing efforts will remain more targeted and personalized, enabling us to engage differently with each of our customers based on their shopping behaviors across all our buying channels. Our ongoing work on enhancing our customer segmentation will ultimately drive our long-term marketing strategy, enabling us to create targeted and personalized content and messaging to our various customer segments. We maintain a stringent, analytical perspective to our marketing program, focusing on understanding incremental outcomes in addition to the “return on ad spend” throughout all our programs. This data-driven philosophy extends across all our marketing initiatives as we look at new ways to engage our customers.

Our marketing programs include email, direct mail, direct marketing, digital marketing, social media, and streaming media, among others. We ended our legacy loyalty program at the end of fiscal 2024 and, in February 2025, we launched our new DXL Rewards program on a new platform. The new DXL Rewards program introduces new loyalty elements, such as more compelling benefits, based on tier migration through spend rather than through points or other loyalty currencies. Because we are not highly promotional, our loyalty program provides a strong value to our customers.

For fiscal 2025, we expect our marketing costs to be approximately 6.0% of sales as compared to 6.8% for fiscal 2024 due primarily to the temporary pause on brand awareness spending.

GLOBAL SOURCING

Our global sourcing strategy is a balanced approach, which considers quality, cost and lead-time, depending on the requirements of the program. We believe our current sourcing structure meets our operating requirements and provides capacity for growth. The growth and effectiveness of our global direct sourcing program is a key component to the strength of merchandise margins.

We have built a strong internal team with extensive experience that is responsible for managing an international network of vendors and suppliers across the globe. We have established strong relationships with many of the leading factories and mills across the globe. Our sourcing network consists of over 30 factories in nine countries that are experts in big + tall sizing and production. In fiscal 2024, approximately 52% of all our product needs were sourced directly. We manufacture a significant percentage of our own brand merchandise in Bangladesh, India, and Southeast Asian countries, including Vietnam and Cambodia. We continue to reduce dependency on China, with less than 5% of our own brands sourced from China, inclusive of our raw materials and trims, and have moved certain programs into countries in the Western Hemisphere that have duty-free opportunities such as Nicaragua and Mexico.

In an effort to minimize foreign currency risk, all payments to our direct sourced vendors are made in U.S. dollars with payment on account.

See "Item 1A. Risk Factors, Operational Risks That May Affect Our Business" for a discussion of the risks associated with the imposition of pending tariffs.

See "Sustainability" below for a discussion of our environmental, ethical and social audits.

DISTRIBUTION

All of our retail distribution operations are centralized at our headquarters located in Canton, Massachusetts. We believe that having a centralized distribution facility maximizes the selling space and in-stock position of our stores and reduces the necessary levels of backroom stock. In addition, the distribution center provides order fulfillment services for our e-commerce business. In-bound calls for our e-commerce business are primarily fulfilled by our distribution center and, if an order cannot be fulfilled by our distribution center, the order is completed at the store level.

Our supply chain technology provides visibility for imports and domestic deliveries giving our buyers accurate shipping information and allowing the distribution center to plan staffing for arriving freight, resulting in reduced costs and improved receipt efficiency.

Our warehousing application and labor management system enable us to streamline our distribution processes, enhance our in-transit times, and reduce our distribution costs. We will continually work to make improvements and upgrades to our software.

For store shipments and domestic customer deliveries, we use large national carriers. We are able to track all deliveries from the warehouse to our individual stores, including the status of in-transit shipments. In addition, we are able to provide our direct customers with Authorized Return Service and Web labels, making returns more convenient for them.

In order to service our international customers, we have contracted with a global e-commerce company for payment and shipment services. Through this service, international customers view and pay for products in their local currency. Our vendor then ships directly to our customer, which we believe helps avoid potential fraud and currency exchange rate risks.

MANAGEMENT INFORMATION SYSTEMS

The infrastructure of our management information systems is a priority to us. We believe that the investments we have made in this regard have improved our overall efficiency and improved our access to information, enabling timely, data-driven decisions.

Our management information systems consist of a full range of retail merchandising and financial systems, which include merchandise planning and reporting, distribution center processing, inventory allocation, sales reporting, and financial processing and reporting. We believe that our current infrastructure provides us the ability and capacity to process transactions more efficiently and provides our management team with comprehensive tools to manage our business. Our direct and retail channels maintain a shared inventory system and we operate a single-system platform for our DXL and Casual Male XL stores to deliver improved efficiencies.

In an effort to improve our inventory management, we have created a standardized set of "best practices" for both our merchandise planning and allocation groups. Using a retail business intelligence solution, we are able to integrate data from several sources and provide enterprise-wide analytics reporting. We have developed a custom Assortment Suite application to leverage business intelligence and predictive analytics to provide high-impact insights into core merchandising tasks.

COMPETITION

Our business faces competition from a variety of sources, including department stores, mass merchandisers, other specialty stores and discount and off-price retailers that sell big + tall men’s clothing. While we have successfully competed on the basis of merchandise assortment, comfort and fit, customer service and desirable store locations, there can be no assurance that other retailers, including e-commerce retailers, will not adopt purchasing and marketing concepts similar to ours. Discount retailers with significant buying power, such as Walmart, Kohl's and J.C. Penney, represent a source of competition for us. The direct business has many competitors, including the King Size catalog and website as well as online marketplaces, such as Amazon.

The United States big + tall men’s clothing market is highly competitive with many national and regional department stores, specialty apparel retailers, single market operators and discount stores offering a broad range of apparel products intended for big + tall men. Besides retail competitors, we consider any casual apparel manufacturer operating in outlet malls throughout the United States to be a competitor in the casual apparel market. We believe that we are the only national operator of men’s apparel stores focused exclusively on the men’s big + tall market.

SEASONALITY

Historically, and consistent with the retail industry, we have experienced seasonal fluctuations in our operating income, net income, and free cash flow. Traditionally, a significant portion of our operating income, net income, and free cash flow is generated in the second and fourth quarters. Our inventory is typically at peak levels by the end of the first and third quarters, which represents a significant use of cash, which is then relieved in the second and fourth quarter as we sell-down our inventory through the spring and holiday shopping seasons.

TRADEMARKS/TRADEMARK LICENSE AGREEMENTS

We own several service marks and trademarks relating to our businesses, including, among others, “Destination XL®”, “DXL®”, “DXL Men's Apparel®”, “Big on Being Better®”, “Casual Male®”, “Casual Male XL®”, “Harbor Bay®”, “Oak Hill®”, “Continuous Comfort®”, “Synrgy™”, “Society of One®”, “True Nation®” and “Wear What You Want℠”. We also hold a U.S. patent for an extendable collar system, which is marketed as “Neck-Relaxer®” and a U.S. copyright for a no-iron hang tag.

SUSTAINABILITY AND GOVERNANCE

We recognize the importance of addressing and prioritizing environmental, social and governance ("ESG") issues throughout our business, including recognizing and addressing specific climate-related risks. During fiscal 2021, we formed the Sustainability and Governance Committee, consisting of a cross-disciplinary team from corporate management and engaged with a third-party firm to assist us in the development of the Company's initial ESG strategy and initiatives. The Sustainability and Governance Committee reports to the senior management team of the Company and to the Nominating and Corporate Governance Committee of our Board of Directors (the "Board"), which is responsible for the oversight of our initiatives. We are working to develop short-term and long-term ESG goals, as well as an action plan.

Since 2019, we have been a member of a leading ethical trade service provider to increase our social, environmental and ethical sustainability, and we participate in their Ethical Trade Audit platform. Since fiscal 2020, we have retained LRQA (formerly Elevate) which is a global leader in supply chain assessment, and we have instituted 4-Pillar audits of our supply chain factories. Our intent is to increase our social, environmental and ethical sustainability by utilizing LRQA’s audit tool, "ERSA", which stands for "Elevate Responsible Sourcing Assessment." ERSA 3.0 covers social compliance, human rights, environmental business ethics, and worker’s sentiment surveys. All audits can be found on LRQA's EIQ tool which is a web-based analytical system on which we participate in their Ethical Trade Audit platform. In fiscal 2023, we added environment assessment audits to LRQA’s services. Through collaboration with LRQA and Bureau Veritas, we are pursuing what we call a "5-Pillar Audit", which includes traceability of both raw materials and the equipment used to produce finished goods.

HUMAN CAPITAL MANAGEMENT

As of February 1, 2025, we employed 1,447 people. We hire additional temporary associates during the peak holiday season. None of our associates are represented by a collective bargaining agreement. Our associates are our greatest asset, and we are committed to providing them with a safe and healthy work environment. Each associate is required to sign a set of policies that includes, among others, the code of ethics, anti-harassment policy, and procedures for raising a complaint. Our policies also include protection of human rights and prohibit the use of child labor or forced, bonded, or indentured labor.

People-First, Purpose-Driven

We are a People-First organization that believes in inclusion, belonging, connection, understanding, a strong culture, and quality leadership, all while defending the rights of our associates.

Since 2017, we have had an initiative called "Normalizing the Brand." Under that umbrella, our "Including You!" committee delivers programs to raise awareness of unconscious bias and highlights the benefits of inclusion, diversity, and belonging in the workplace. We have policies, required training, and other educational resources in place related to anti-discrimination, anti-harassment, and belonging. Our associates also have access to an anonymous hotline for reporting concerns. In 2021, we joined the SHRM CEO Action for Inclusion & Diversity, which is a coalition of over 2,500 CEOs pledging to promote inclusion and diversity in the workplace. By joining the SHRM CEO Action for Inclusion & Diversity, we pledged to cultivate an environment of belonging and genuine connection for every member of our team, guests, and communities in which diverse perspectives and experiences are welcomed and respected.

Workplace, Culture, and Career Development

We are committed to providing our associates with an environment where they have the opportunity to offer input on issues affecting the Company’s workforce and the employer-associate relationship. Periodically throughout the year, we encourage feedback and ideas from our associates through our annual engagement surveys, organizational performance profile survey, and the always-available “What’s on Your Mind” feedback link in stores. The information gathered through these channels helps us make a positive impact on the associate work experience and overall organizational culture.

All associates are invited to participate in multiple employee resource groups, which exist to foster a positive culture and a sense of belonging through internal networking, mentoring, and development opportunities.

Perhaps most importantly, we promote professional development, career growth, and mentorship programs. Since 2014, we have offered our associates the opportunity to participate in our DXLG Mentor Program, which pairs mentees with mentors for one-year periods. The DXL Leadership Group was formed in fiscal 2016 with a mission of "Associates supporting, educating, and empowering each other @ DXLG." It started as a pilot program and quickly expanded to include over 40 leaders, including both people and process managers, located in the corporate office and the field.

In addition to our learning management system, which provides a wide array of online learning opportunities, we also engage with Leadercast, which provides a platform that offers additional online leadership training as well as content for in-person shared events. In fiscal 2024, we continued to focus on development by launching a New Manager Cohort, designed for associates new to supervising others. This program provides associates with an opportunity to learn together and from each other on a variety of leadership topics.

Our Associate Engagement & Development Committee organizes a series of "Lunch, Learn, Lead" and "Coffee Talk" sessions throughout the year to provide our associates with opportunities to learn as a group and gain insight on a variety of topics, such as leadership, DXL’s social responsibility initiatives, financial well-being, TED Talks, department-specific learning, Normalizing the Brand, technology, and more.

To give associates the opportunity to continue their formal education, we have partnered with Marist College to provide a 25% discount on online tuition costs for our DXL associates and their immediate adult family members.

Associate Safety

Associate safety and well-being are a critical component of our culture. We have a comprehensive employee safety program along with policies and procedures that support this initiative. Our safety manual provides direction and best practices for ensuring associate safety. We take pride in the preventative measures we take, including evacuation/shelter-in-place drills as well as our partnership with certified safety experts who help us proactively address potential risks and assist us in the creation of training modules to roll out to our associates. Policies are routinely communicated and training is provided to associates, as appropriate.

Compensation and Benefits

Our compensation programs are designed to pay our associates competitively in the market based on their skills, qualifications, role, and abilities. Our benefits are designed to help employees and their families stay healthy while balancing their work and personal lives. These benefits include health and wellness programs, paid time off, employee assistance, competitive pay, career growth opportunities, paid volunteer time, product discounts, and a culture of recognition. We are continually looking for programs and opportunities to offer our associates to ensure their physical and mental wellness. We also highlight mental health awareness as part of our "Lunch, Learn, Lead" series and provide relevant content within our learning management system. Additionally, we offer an Employee Assistance Program, which provides 24/7 assistance to associates and their family members for a variety of issues such as stress, family, grief, parenting, and finances.

AVAILABLE INFORMATION

Our corporate website is www.dxl.com. Our investor relations site is http://investor.dxl.com. We make available through our website, free of charge, our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to such reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") as soon as reasonably practicable after we have electronically filed such material with, or furnished such materials to, the Securities and Exchange Commission (the "SEC"). The SEC maintains an internet site that contains reports, proxy and information statements, and other information for issuers that file electronically with the SEC at http://www.sec.gov.